Small businesses across the United States are increasingly concerned and, in some cases, actively challenging aspects of President Biden’s tax policies, particularly those that affect partnerships and small business investment. While there is no sweeping wave of lawsuits solely branded as “small businesses suing Biden’s tax policies,” there is significant legal and political pushback related to specific tax enforcement rules and regulations introduced or maintained during the Biden administration that impact small business operations and finances.
One of the most contentious issues involves changes to the “economic substance doctrine” and related IRS enforcement policies that affect business partnerships. This doctrine governs how the IRS determines whether a business transaction has genuine economic purpose beyond just tax avoidance. Under Biden-era regulations, the IRS has adopted a stricter and more punitive approach to partnerships, which are a common structure for small businesses. The new rules impose severe penalties, including a strict liability penalty that can reach 60%, on partners if the IRS deems their tax positions improper. This has created a climate of uncertainty and fear among small business owners who operate as partnerships, as they face the risk of unexpectedly large tax bills and penalties without clear guidance or Congressional approval.
This enforcement uncertainty is not just theoretical; studies have shown that it is already dampening investment and growth decisions among small businesses. The fear of aggressive IRS audits and harsh penalties discourages entrepreneurs from making long-term investments or expanding their operations, which undermines the intended benefits of other small business-friendly provisions in recent legislation. The uncertainty also complicates tax planning and compliance, increasing administrative burdens and costs for small business owners.
Beyond the partnership tax enforcement issues, there are broader concerns about the Biden administration’s overall tax approach, which some small business advocates view as hostile or overly aggressive. While the administration has introduced some measures aimed at supporting small businesses, such as clarifications on research and development (R&D) expensing rules, the overarching narrative among many small business groups is one of caution and resistance due to the perceived risk of increased tax liabilities and enforcement actions.
It is important to note that the legal challenges and disputes related to Biden’s tax policies are often complex and technical, involving interpretations of tax law and administrative authority rather than straightforward lawsuits filed by small businesses en masse. For example, some of the most high-profile cases involve coalitions of businesses and states challenging tariff policies or executive actions that indirectly affect small businesses, but these are distinct from direct tax policy lawsuits.
In summary, while small businesses are not broadly suing over Biden’s tax policies in a simple, uniform way,
